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Globalization Notes
The Globalization of Markets

The term “globalization” first appeared in a dictionary of (American) English in 1951, and its roots can be traced back to the terms “global” (which took on the meaning of ‘world scale’ in the late 19th century) and "globalize” (which appeared in the 1940s).1,2 Globalization came to prominence in popular discourse in the late 1990s and early 2000s, concurrent with a surge in publications on the topic. In the early 1990s, the U.S. Library of Congress catalog listed less than 50 publications per year related to globalization – from 2002 to 2008 there were more than 1100 every year.

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Globalization Notes

The Globalization of Firms

This note considers how firms have globalized by extending themselves—in multiple ways—across national borders. While only a very small fraction of firms have meaningful cross-border activities, the ones that do tend to be larger and more innovative than other firms and account for significant shares of international flows and even aggregate economic activity. Thus, in the U.S., while multinationals represented well under 0.1% of all companies, they accounted for about 24% of all private jobs, 71% of exports of goods, and 84% of nonpublic R&D in 2009.1 For the very largest multinationals, “international” activities account for more in the way of sales, assets and employment than their domestic operations.

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Globalization Notes
National Cultural Differences and Multinationals Business

The eminent Dutch psychologist, management researcher, and culture expert Geert Hofstede, early in his career, interviewed unsuccessfully for an engineering job with an American company. Later, he wrote of typical cross-cultural misunderstandings that crop up when American managers interview Dutch recruits and vice versa:

“American applicants, to Dutch eyes, oversell themselves. Their CVs are worded in superlatives…during the interview they try to behave assertively, promising things they are very unlikely to realize…Dutch applicants in American eyes undersell themselves. They write modest and usually short CVs, counting on the interviewer to find out by asking how good they really are…they are very careful not to be seen as braggarts and not to make promises they are not absolutely sure they can fulfill. American interviewers know how to interpret American CVs and interviews and they tend to discount the information provided. Dutch interviewers, accustomed to Dutch applicants, tend to upgrade the information. To an uninitiated American interviewer an uninitiated Dutch applicant comes across as a sucker. To an uninitiated Dutch interviewer an uninitiated American applicant comes across as a braggart.”

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Globalization Notes
Differences in Business Ownership and Governance around the World

Culture, the first element of the CAGE framework presented in the article “Distance Still Matters,” refers to the attributes of a society that are sustained by interactions among people, whereas the administrative element of CAGE refers to aspects that are sustained by state authority: governmental policies (and practices), laws and public institutions. As noted in that article, administrative attributes such as colonial-era ties, preferential trading arrangements, a common currency, political amity, policies of openness, and strong public institutions significantly boost trade. Similar influences also seem to apply to foreign direct investment and other cross-border flows of capital, of people and of information. And while administrative similarities account for most of these influences, selected administrative differences can also generate cross-border activity, e.g., through the exploitation of tax or regulatory differences.

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